Indian Budget 2009: Great expectations
The budget put to rest the great expectations of the industry who were pinning their hopes on a progressive budget. Pranab Mukherjee and company proved that India lives in the aam admi and the villages. But yet glitches remain.
THE BUDGET 2009 was eagerly awaited by all sections of the society. Never before had a budget interested so many of the Indian citizens. The United Progressive Alliance government which came back with a strong mandate was expected to throw off the shackles imposed by the Left Front in the former government and announce a pathbreaking budget with lots of reforms, Foreign direct investment (FDI), disinvestment, tax breaks for the corporate and so on.
Unfortunately the people who had these expectations did not consider it important that India still lives in her villages. India is still essentially an agrarian economy with the vast majority of the population eking it out in the farms for a pittance. An egalitarian budget which would have pampered the stock market would have been disastrous for the country in the long run. The increase in allocation to the National Rural Employment Guarantee Scheme (NREGS) to 39100 crores was heartening. The increased allocation to the agricultural sector is also appreciated.
We should not forget that India survived the recent meltdown mainly because the Left Front restrained the then UPA governement from instant globilasation. It was heartening to see that Pranab Mukerjee almost adhered to the previous Common Minimum Programme (CMP) in his budget speech.
On the face of it the budget looks like a balanced budget, an inclusive budget which should spur the gross domestic product (GDP) growth. Yes, concerns do remain regarding the high fiscal deficit, but at this moment restoring the growth to the fast track is more important than a high fiscal deficit. And Pranab Mukherjee has committed to bringing down the fiscal deficit to four per cent within two years. And why are the analysts complaining about the high fiscal deficit. In today's scenario, the government borrowing is akin to the "stimulus packages" announced by almost all countries to fight the recession. If the government would have kept the fiscal deficit at four per cent and later on announced an economic stimulus package of Rs 200,000 crores, the industry would have applauded and the sensex would have touched the skies.
Pranab Mukherjee should be complemented that he did not resort to such tactics and instead laid his cards on the table in an honest manner.
But many disappointments and glitches remain as follows :
1. Cut in the fringe benefit tax (FBT): Companies which are doling out lacs in the name of fringe benefit to the chosen few employees must be ready to pay the FBT. The cut in FBT is a loss for the exchequer and at the same time will act as an incentive for the employee to demand more FBT and less salary thereby reducing the IT burden.
2. Removal of surcharge: Totally unnecessary and put in simply to please the upper middle class and the rich employees. It is shameful that in a country like India which has over one-third of her people living in abject poverty, the senior management staff still earn in crores annually. In fact, India is a tax haven with a low tax rate. Being a country with social welfare as the undergoing theme of the constitution, I would have been happier with an increase in the tax burden and diverting this money for healthcare for the masses.
3. Roadmap for disinvestment: The budget should have mentioned a roadmap for disinvestment at least in the loss making PSUs. These companies are bleeding the exchequer and the faster they are rid of, the better. At last count, there were more than 100 loss making PSUs with combined losses of more than Rs 10000 crores. For example the National Aviation Company has a mounting loss of more than 2000 crores. Again a marginal disinvestment in PSUs like National Thermal Power Corporation (NTPC) and Bharat Heavy Electricals Ltd (BHEL) amongst others would have enabled Mukherjee to control the fiscal deficit.
4. Reduction in subsidy for petrol, kerosene and LPG: Subsidy in kerosene should be only for those living below the poverty line. Currently the Public Distribution System (PDS) is in the clutches of organised mafia who are diverting the kerosene for adulteration purposes. Again the concept of subsidising LPG is absolutely ridiculous in a country like India. A person who has the wherewithal to use LPG gas can surely afford to pay Rs 100/ more per cylinder. In any case the LPG subsidy is most useful for the restaurants and hotels which are raking in the profits at the expense of the subsidy. Again, petrol is used only in passenger cars and a citizen who can afford a car does not need this subsidy. Thus the subsidy in fuel should be restricted to diesel (not for passenger cars) and for kerosene (only for families below the poverty line).
5. Allocation for primary education: It is surprising that the government did not increase the allocation for the Sarva Shiksha Abhiyan. The allocation for this remains at 13100 crores, the same figure as for last year. I would have been delighted if the surcharge for the income tax would have remained the same, but would have been renamed as SSA surcharge and the funds thereby diverted for the above education scheme.
6. Allocation for rural healthcare: The condition of health care in the rural areas are dismal with hospitals few and far between and even these hospitals are without the basic equipment and medicines and missing doctors. Medicines are diverted for outside sale, doctors on government payroll are missing because they are busy with their private practice and expensive equipments are lying disused in the hospitals. Increased funds would have allowed the health ministry to make out a working blueprint for the efficient management of the existing hospitals and building new ones where required.
7. Allocation for agriculture: The spate of farmer suicides need to be taken very seriously and special budgetary measure taken for the same. There are more than 200000 recorded farmer suicides in the last decade. The Vidarbha region alone accounts for more than 4000 suicides annually. It was saddenning that there was no mention of these in the budget and no specific allocation for prevention of the same in the future.
There are many more grave problems facing India. One hopes that the government wakes up to these and takes measures in time so that there can be all round development in India. If the rich keep getting richer and the poor getting poorer we would be laying out a recipe for social unrest and disorder. For any country to grow and develop it is necessary to take along the poorest and not smugly tell them to wait for the trickle down effect. It may then be a case of too little, too late.
We should not forget that India survived the recent meltdown mainly because the Left Front restrained the then UPA governement from instant globilasation. It was heartening to see that Pranab Mukerjee almost adhered to the previous Common Minimum Programme (CMP) in his budget speech.
On the face of it the budget looks like a balanced budget, an inclusive budget which should spur the gross domestic product (GDP) growth. Yes, concerns do remain regarding the high fiscal deficit, but at this moment restoring the growth to the fast track is more important than a high fiscal deficit. And Pranab Mukherjee has committed to bringing down the fiscal deficit to four per cent within two years. And why are the analysts complaining about the high fiscal deficit. In today's scenario, the government borrowing is akin to the "stimulus packages" announced by almost all countries to fight the recession. If the government would have kept the fiscal deficit at four per cent and later on announced an economic stimulus package of Rs 200,000 crores, the industry would have applauded and the sensex would have touched the skies.
Pranab Mukherjee should be complemented that he did not resort to such tactics and instead laid his cards on the table in an honest manner.
But many disappointments and glitches remain as follows :
1. Cut in the fringe benefit tax (FBT): Companies which are doling out lacs in the name of fringe benefit to the chosen few employees must be ready to pay the FBT. The cut in FBT is a loss for the exchequer and at the same time will act as an incentive for the employee to demand more FBT and less salary thereby reducing the IT burden.
2. Removal of surcharge: Totally unnecessary and put in simply to please the upper middle class and the rich employees. It is shameful that in a country like India which has over one-third of her people living in abject poverty, the senior management staff still earn in crores annually. In fact, India is a tax haven with a low tax rate. Being a country with social welfare as the undergoing theme of the constitution, I would have been happier with an increase in the tax burden and diverting this money for healthcare for the masses.
3. Roadmap for disinvestment: The budget should have mentioned a roadmap for disinvestment at least in the loss making PSUs. These companies are bleeding the exchequer and the faster they are rid of, the better. At last count, there were more than 100 loss making PSUs with combined losses of more than Rs 10000 crores. For example the National Aviation Company has a mounting loss of more than 2000 crores. Again a marginal disinvestment in PSUs like National Thermal Power Corporation (NTPC) and Bharat Heavy Electricals Ltd (BHEL) amongst others would have enabled Mukherjee to control the fiscal deficit.
4. Reduction in subsidy for petrol, kerosene and LPG: Subsidy in kerosene should be only for those living below the poverty line. Currently the Public Distribution System (PDS) is in the clutches of organised mafia who are diverting the kerosene for adulteration purposes. Again the concept of subsidising LPG is absolutely ridiculous in a country like India. A person who has the wherewithal to use LPG gas can surely afford to pay Rs 100/ more per cylinder. In any case the LPG subsidy is most useful for the restaurants and hotels which are raking in the profits at the expense of the subsidy. Again, petrol is used only in passenger cars and a citizen who can afford a car does not need this subsidy. Thus the subsidy in fuel should be restricted to diesel (not for passenger cars) and for kerosene (only for families below the poverty line).
5. Allocation for primary education: It is surprising that the government did not increase the allocation for the Sarva Shiksha Abhiyan. The allocation for this remains at 13100 crores, the same figure as for last year. I would have been delighted if the surcharge for the income tax would have remained the same, but would have been renamed as SSA surcharge and the funds thereby diverted for the above education scheme.
6. Allocation for rural healthcare: The condition of health care in the rural areas are dismal with hospitals few and far between and even these hospitals are without the basic equipment and medicines and missing doctors. Medicines are diverted for outside sale, doctors on government payroll are missing because they are busy with their private practice and expensive equipments are lying disused in the hospitals. Increased funds would have allowed the health ministry to make out a working blueprint for the efficient management of the existing hospitals and building new ones where required.
7. Allocation for agriculture: The spate of farmer suicides need to be taken very seriously and special budgetary measure taken for the same. There are more than 200000 recorded farmer suicides in the last decade. The Vidarbha region alone accounts for more than 4000 suicides annually. It was saddenning that there was no mention of these in the budget and no specific allocation for prevention of the same in the future.
There are many more grave problems facing India. One hopes that the government wakes up to these and takes measures in time so that there can be all round development in India. If the rich keep getting richer and the poor getting poorer we would be laying out a recipe for social unrest and disorder. For any country to grow and develop it is necessary to take along the poorest and not smugly tell them to wait for the trickle down effect. It may then be a case of too little, too late.
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